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Posted on Wednesday, April 24, 2019

Court Finds Potential OCI, But Denies Protest for Lack of Prejudice

A recent decision from the U.S. Court of Federal Claims reminds protestors that it is not enough to establish agency error, but that the protestor must also be able to demonstrate that it was prejudiced by that error. In this protest of the Encore III small business contract awards, the Court of Federal Claims agreed with the protestor that the agency’s actions had resulted in OCI concerns, but determined that the protestor could not establish that it had a substantial chance of receiving the contract but for the agency’s errors.

On March 2, 2016, the United States Defense Information Services Agency (“DISA”) issued the solicitation for the Encore III contract to procure information technology services. DISA anticipated awarding contracts in two separate suites: (1) awards resulting from full and open competition (“F&O suite”) and (2) awards set-aside for small business concerns (“SB suite”). DISA intended to award up to twenty contracts under each suite. Awards in both suites were made on a lowest-priced, technically acceptable basis.

The scope of work for both suites was identical, and the agency received initial proposals from offerors in both suites on October 21, 2016. However, at that point, the timelines for the two suites diverged. DISA awarded contracts under the F&O suite on October 19, 2017, and provided debriefings to offerors in the F&O suite in November 2017 – including four offerors who were also offerors in the SB suite through joint ventures with small businesses. These debriefings included the total proposed prices (TPP), total evaluated prices (TEP), technical evaluation ratings, and past performance ratings for the twenty awardees, and the Final Consensus Report for the debriefed offeror.

In the SB suite, however, DISA moved more slowly. The agency determined a competitive range of thirty offerors and engaged in five rounds of discussions and revised proposals, which culminated in the award of the SB suite contracts to the twenty lowest-priced, technically acceptable offerors on August 24, 2018. Significantly, the second through fifth rounds of the SB suite discussions and revised proposals all occurred after the November 2017 debriefings of the F&O offerors that were also competing for work from the SB suite.

Inserso Corporation, an unsuccessful offeror in the SB suite, filed a bid protest at the Court of Federal Claims. Inserso raised two protest grounds related to DISA’s debriefings of the F&O suite of offerors. First, Inserso argued that the information in the F&O debriefings created organizational conflicts of interest (“OCI”) and unfair competitive advantages for those F&O offerors who were also in the SB suite competition. Second, Inserso argued that DISA failed to treat offerors equally by distributing competitively sensitive pricing information with some, but not all, SB offerors.

The Court of Federal Claims agreed that “the nature of a multi-suite solicitation in which offerors can bid in multiple suites raises OCI concerns, particularly when the scope of work and evaluation factors are nearly identical for each suite.” On this point, the Court stated, “[i]n a multi-suite solicitation, agencies can avoid this type of potential OCI by issuing awards and debriefings for all suites simultaneously, so competitively advantageous information from one suite cannot be used by offerors in subsequent proposals.”

The Court also agreed that “potentially unfair and unequal treatment could arise” when DISA “distributed information to a limited number of SB offerors that could have provided a slight competitive advantage over offerors who did not receive the same information.”

The Court then turned to the issue of prejudice. The Court noted that “[p]rejudice is presumed once a potentially significant OCI is identified,” but that the government can overcome that presumption with “compelling evidence to the contrary.”

Here, the Court determined that there was compelling evidence to overcome the presumption of prejudice. First, the release of the competitive information to the four F&O offerors did not impact Inserso’s competitive standing, because those four offerors fell within the winning range for the SB suite throughout the procurement, whereas Inserso’s price had consistently been higher than the winning range throughout every round of revisions.

Second, Inserso could not show that, if it had the same information, it would have successfully lowered its price to win. Specifically, it had argued that, if it had received the same competitively sensitive pricing information, it could have revised its prices downward such that it would have been within the winning range. The government and intervenors responded that Inserso’s final proposed prices had been reduced by almost $1 billion from its prior submission and that Inserso did not demonstrate that it could have “sufficiently reduced its price to receive an award if other offerors made similar reductions.”

The Court concluded that “[t]he release of the allegedly advantageous information did not impact plaintiff’s competitive standing in the SB suite,” and that “[t]he only scenario in which the Court can foresee plaintiff successfully adjusting its price enough to receive an award, is one in which only the plaintiff, but none of the other SB Offerors, received the allegedly competitive information.” Thus, despite finding that there was a possible OCI and the potential for unfair and unequal treatment, the Court concluded that the government and intervenors had “provided sufficient compelling evidence to rebut the presumption of prejudice,” and denied the protest.

While the Court ultimately denied Inserso’s protest because it found that Inserso was not prejudiced by DISA’s actions, the Court’s recognition that an OCI may exist when offerors can bid on multiple suites in a multi-suite solicitation raises a number of potential headaches for federal agencies. One reason federal agencies conduct multi-suite solicitations is for efficiency. To delay one suite of awards until award determinations are made in all suites undermines that efficiency goal. DISA could have avoided a possible OCI concern in this procurement if it had limited the information it provided in its debriefing to the F&O offerors; however, this goes against the policy of providing more, not less, substantive information in a debriefing. It remains to be seen whether this decision will impact how agencies handle multi-suite solicitations in the future.

Berenzweig Leonard is teaming up with Red Team Consulting for a monthly newsletter featuring upcoming contracts, key protest decisions, events, and more. This post was published in the April 2019 Monthly Insights newsletter. To sign up for Monthly Insights, please click here.